Op-Ed: Questions remain about IKEA site

November 13, 2012|By Ryan Ford

The Burbank IKEA currently sits on a city-owned piece of property at 600 N. San Fernando Blvd., adjacent to the Burbank Town Center. The IKEA is also the beneficiary of a 95-year, rent-free lease from the city of which 72 years still remain. Even with the generous benefits afforded to the IKEA, they wish to move. The good news is IKEA wants to stay in Burbank and is looking to acquire a large site at 805 S. San Fernando Blvd. (near Alameda Avenue). Better yet, the Burbank Town Center is looking to acquire the property the IKEA sits on from the city of Burbank to expand its operations associated with the Town Center.

As a part of the proposed resolutions brought before the city, the owners of the Burbank Town Center asked the city to promise to buy back the IKEA site (at a premium), at any time in the next 10 years, if the IKEA chooses not to leave the current location. This is a pretty logical caveat; the Burbank Town Center doesn't want to buy a piece of property whose tenant has a 72- year rent-free lease.

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At first blush this is a win-win-win for the city, for IKEA and for the Burbank Town Center. The currently unused 805 S. San Fernando Blvd. would house a new, bigger IKEA in a part of the city that needs further development; the former IKEA site would be used to enhance the attractiveness of the Burbank Town Center; and the city of Burbank would see increased sales tax revenues from the bigger IKEA, from the Town Center and from the former IKEA site (both in its sale and in newly acquired property taxes).

Here comes the tricky part — the sale price of the current IKEA site to the owners of the Burbank Town Center. The current value of the IKEA site is very low, because if one were to purchase the property, the buyer couldn't charge rent to the current tenant, IKEA, for 72 years. This makes the purchase logical only if you plan on living quite a long time or if you roll the dice that IKEA will leave. As such, the IKEA site is currently assessed at $1.46 million (and a negotiated $1.3 million sale price to the Burbank Town Center), a point brought out by Councilman David Gordon during a City Council meeting.